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$272 Million Tobacco Settlement Payment To State And Counties Expected December 31

Attorney General Spitzer today announced that New York State, New York City and the 57 counties outside New York City are scheduled to receive approximately $272 million from the tobacco companies on December 31. The payment is about 10% higher than the corresponding settlement payment made last year, and increases the total amount received since 1999 to over $2 billion.

"This quarter-billion dollar payment will give counties an extra reason to celebrate on New Year's Eve," said Attorney General Spitzer. "Local governments throughout the state are facing tough economic times, and this influx of funds will definitely help reduce the burden on New York's taxpayers."

The $272 million payment will be divided among New York State, New York City and the individual counties, with the State scheduled to receive $139 million (51%), New York City receiving $73 million (27%), and a total of $60 million (22%) being paid to the other 57 counties. The payment is not due officially until January 10, 2002, but the tobacco industry will be making the payment early for the third consecutive year.

The payment is part of the 1998 tobacco Master Settlement Agreement (MSA), which requires tobacco companies to pay over $200 billion to 52 states and territories, and imposes significant marketing and advertising restrictions on the participating tobacco manufacturers. New York is expected to receive about $25 billion during the first 25 years of the settlement, with additional payments continuing thereafter. There are two major MSA payments each year until 2004 -- one in January and one in April -- followed by annual payments thereafter.

Each tobacco settlement payment is based on a complex formula set forth in the MSA. The calculations begin with a base amount, which may increase or decrease depending on a number of factors, including national cigarette shipments, non-participating manufacturer sales, inflation and other adjustments.

"There are two pieces of good news this year," said the Attorney General. "First, cigarette consumption continues to decrease -- there has been an 18% drop in sales nationwide since 1997 -- which is great for the health of New Yorkers, and will mean lower long-term health care costs.

"Second, even though the settlement payments are reduced somewhat when cigarette sales decrease, the total dollar amount of the payments is now rising due to other aspects of the formula," the Attorney General added. "This $272 million payment is 10% higher than the corresponding payment last year, and hopefully we have now turned the corner and future payments will be higher as well. By budgeting these payments conservatively, counties will continue to reap the benefits of any future increases."

This is the sixth "major" payment that New York's state and local governments have received under the MSA, each of which has exceeded $240 million. The payments received so far are set forth below:

Year

Initial Payment

April Payment

Other Payments

Total

1999

$315 million

None

None

$315 million

2000

$274 million

$441 million

None

$715 million

2001

$247 million

$519 million

$6 million

$772 million

2002

$272 million

-

-

$272 million

Total:

$2.074 billion

The Attorney General's Office, which provides periodic tobacco settlement payment information to assist municipal officials in their financial planning, recommends that local officials be as conservative as possible in budgeting because of the frequent changes in payment amounts.